Earnings Call: H2 2018

Feb 13, 2019

Welcome to the Navigator Company Conference Call. I will now hand over to Joanna Apoton. Please go ahead. Good morning, ladies and gentlemen. Welcome to Navigators Company Earnings Conference Call for Q4 and the full year of 2018. We will start, as usual, with a presentation on our results. Our CEO, Jurgen Silveira, will make some remarks on the many achievements of the period and our financial figures and will be followed by the pulp and paper market comments. Noussaint will provide a brief update on the CATIA project and the Mozambique project and Gianfao will be available also on our next projects related to the bioeconomy areas. We will finish, as usual, with a Q and A session, first about the results, and then Diogo will also be available to answer questions on the end of its mandate. The presentation can be accessed through the links available on the and questions may also be addressed through the webcast platform. I will now hand over to Dior. Dior, please? Good morning, and thank you for joining us today. I'm very pleased to comment on the great set of results that we have published this morning. We managed to overcome some difficult challenges that occurred throughout the year, and we actually registered the best performance in the history of the company. So let's start and go over to Slide number 3. 2018 was a record year for turnover, EBITDA and net profit. The sales were just under EUR 1,700,000,000 growing 3.3% year on year and EBITDA stood at €455,000,000 increasing 13% and reflecting an EBITDA over sales margin of 27%. This was achieved in a year where we faced several challenges, mainly in the terms of our industrial activity. We had some prolonged production stoppages in our mills, some plants, others and plants, which severely limited our volumes available for sales. Specifically, Q4 was impacted by 2 major events: Hurricane Leslie, which landfall caused property damages at our figure at the Faroe industrial site and forced to stop production for almost a week. With the efforts and the remarkable performance of our local teams combined with support and engagement from various areas in the group. The work on repairing the damage was immediately started and allows to minimize the stoppage with the top line and paper machines 12 quickly going back into operation. The second event was the partial conversion of our PM3 at our suitable site in December, which allows for production of heavyweights. This involved the production stoppage that affected of course also the volume of paper available for sale. We were however able to offset the production loss with higher prices for both bleach eucalyptus craft pulp, paper and also tissue. The different stoppages implied of course higher costs and all of our efficiency measures and cost reduction processes assumed a very particular relevance. We managed, however, to achieve EUR 21,000,000 of positive impact on our EBITDA for the full year. Alongside the operational difficulties, we concluded 2 major growth projects, The expansion of top capacity at Figueira del Forage and the construction of the new integrated tissue plant in our Kessiea Mill in Abeyra. This large investment allows Navigator to double its tissue capacity and become a relevant and efficient player in the Iberian Peninsula. In addition to these 2 major projects, we also invested in the partial conversion of 1 of our paper machines, which I just referred to, which allows for the production of heavyweight paper. Complementing our portfolio of paper products. So CapEx in 2018 totaled a significant amount of EUR 216,000,000 Still, in a year marked by high growth CapEx, we managed to record free cash flow of EUR 211,000,000 Free cash flow was positively impacted, let me remind you, by the sale of our pellet business, but also by a capital management of working capital. On the negative front, Picasso was impacted by our anti dumping duties that I will come back to. So those were the anti dumping duties clearly one of the major challenges we did face in 2018. As you all remember, we were surprised by notification by the U. S. Department of Commerce in August of a tax rate of 37.34% applied to our peso sales to the U. S. After being notified just a few months earlier of a provisional rate of 0%. After significant efforts, the group managed to prove that the previous rate was an error and that the rate was therefore revised down to 1.75%. Supposing Navigators claims that it does not engage at all in anti dumping practices in its commercial activities in the U. S. Nor anywhere else for that matter. Unfortunately, these had those several consequences for the company, namely in our commercial activity. But this antidumping issue also deeply impacted our share price. We believe the impact of the initial rate was clearly overestimated by the market and even after the revision of the rate, the share price never recovered actually. These as well navigated to initiate at the end of the year the purchase of own shares in a clear sign of confidence in its shares. So we did buy approximately 1,200,000 shares during December January with a total investment of EUR 4,600,000. When reviewing 2018, I need to acknowledge another important event that deeply impacted the the group, backing away of our Chairman and main shareholder, Mr. Pedro Keroche Frere. Even though he was not involved in our day to day business, he was our charismatic figure and a reference for everyone within our group of courage, entrepreneurship and human values. And you will be deeply missed. So just to finish our overview of the year, there is one key aspect that I would like to transmit here today and it is the incredible resilience of the Navigator company. This was a strong year, of course, for the pulp and paper industry in general. But when faced with all the operational market and regulatory challenges mentioned, we managed to overcome these difficulties by working in a coherent and consistent way, proactively increasing paper prices, focusing on constantly improving performance and working in more innovative and sustainable way. This resilience is very clear when we look the performance of the group over the last years as shown on Slide 4. We have shown consistent and strong results in a sustainable way, growing and becoming more profitable. So I will now go to Slide 6, where we can see that 2018 was a very positive year for pulp prices, namely hot rolled pulp, which increased on average US212 dollars a ton year on year, that's 26% and €151 per ton year on year as well, which is 21% this of course over 2017. Actually softwood pulp prices also increased significantly over US286 dollars per ton plus 21 percent and high operating rates allowed for a large increase in softwood prices throughout the first half. This amplified the price gap between both fibers, long and short and provided support for additional price increases in hardwood, which remained at a price level of US10.50 dollars per ton for 30 consecutive weeks. It was only at the end of the year that pulp prices started to correct with softwood being particularly hit. Now going to slide 7. We have a brief wrap up of the main drivers behind the top markets in 2018. We saw the increase in available pulp due to the ramp up of the new capacity that started last year, namely of course from Latin America. And at the same time, there were quite several planned and unplanned stoppages throughout the world that reduced pulp availability on the market. And this allowed prices to remain at a very stable level throughout the second and the third quarter. Demand for PHAP was strong in 20 8, and it's estimated to have grown around 2.5%. There was some slowdown in activity in China that we believe resulted from a combination of factors impacting the Chinese economy. The trade wars between China and the U. S. Created a major uncertainty and instability in the business climate, which together with the seasonal activity decline resulted in a slowdown of economic and industrial activity in China. This led to some down time among paper and board producers and there was also some destocking from both end users. Nevertheless, we believe these to be temporary issues and that the fundamentals for the pulp industry remains strong. There is no significant capacity coming to the market in the coming 2 years at least. And demand is estimated to continue to increase at current levels or above. There were new paper capacity starting in China in 2018, 1,300,000 tons of tissue and 1,200,000 tons of uncoated woodfree, which impact on demand for pulp will be felt mainly this year 2019. More recently, some actions from several pulp producers that curtail production and increase own stocks have led to a more balanced market and a price adjustment. The conclusion of the merger between Suzano and Fibria in January has created a global growth, which has already taken some initiatives contributing to improve market stability. Going now to the paper market on Slide 8. Figures from BPBC show that Encoated Wood Free Papers continues to be the best performing printing and writing grade globally. With uncoated woodfree paper demand decreasing less than 1% in 2018, whereas unfortunately other types of paper experienced significant demand reduction during the same period. If we go to Slide 9, we summarize what we believe are the specific conditions of the encoded WoodSpring market and we can say the global market conditions continue stable even though with some differences among regions. So uncoated wood free demand was stronger in the U. S. Than in Western Europe. Used to be the reverse, but this year this was clear. This was with regions trending in opposite directions during the year. That's to say, Europe performed better in the second half versus the first half with some major Central and Southern European markets showing even year on year growth. On the other side, the USA actually performed better at the beginning of the year and then cooled in the last months of 2018. So recently, we saw additional announcements of capacity closures, namely in the U. S. With Georgia Pacific completely exiting the uncoated woodfree business by announcing the closure of its Port Dutson mill at the end of Q1 2019. This represents approximately 507,000 tons less in and coated with reproduction in the U. S. Market, which is almost 8% of the U. S. Capacity. So we believe that this closure together with the growth experienced in consumption in the major European markets during second half of last year will create a more tight demand for uncoated in the near future. Actually, we already see positive signs for orders in January. These recent developments have also led to price increase announcements in the U. S. For implementation at the beginning of next month, let's say March. Taking a closer look at prices for uncoated with free on Slide 10, we see that the main index A4B CapEx performed very positively during 2018 gaining 7% on average versus the same period last year and ended the year at over €90905 per ton. This positive trend is continuing and the latest value for the index shows a level of €417 per ton. The price increase announced by Navigator for the European market at the end of last year is being successfully implementing since mid January this year. I would like now to go over the group's performance into some more details and for that I suggest we move to Slide 12. In paper business and coated woodfree sales totaled 1513,000 tons, down by 4% on the previous year due essentially to production deviations caused by unplanned stoppages already mentioned previously. As a result of implementing a series of price increase over the year in Europe and other geographic regions, navigator benefited from an average price 8.5% higher than 2017 average price. This allowing it to offset in value the reduction in volume sold, meaning that steel sales grew by 4% to €1248,000,000 This 8.5% increase in Navigator's average prices clearly outperformed the European benchmark index, the ForEx A4B copy, which rose 7.1% to €8.73 per ton. Navigator's average price was positively influenced by a significant improvement in the product mix in terms of quality, 55% premium sales up from 49 percent and in the proportion of new brand product, 69% up from 62 On the negative side, this was countered by evolution of the euro dollar exchange rate. As you know, the average exchange rate for the period was 1 point $1.815 which compares to $1.12 in the previous year. Regarding our top business on slide 13, we see that spent volume totaled 253,000 tonnes in 2018, down by 18.5% on the figure recorded in 2017. This reduction in volume was completely offset by the increase in sales price and sales in value showed an increase of 1%, standing at approximately €167,000,000 Rising net sales price were due to market conditions and also to the growing proportion again of sales represented by value added segment. As you know, we're especially strong in decor and specialties and the weight of that segment was up from 62% to 73% in 2018. This improvement in the sales mix permitted the rising navigator average sales price of 25% to outperform again the market index. Going over to the tissue business on Slide 14. There was an upward adjustment in the average sales price in relation to 2017, up 7.5%. As a result, here also of an improved product mix, with wheels representing a smaller portion of sales and therefore finished products a larger portion. But also due to price rises implemented. Sales stood at €91,000,000 23% up from 2017 and included sales of finished products from our new TECM mill. However, rising average tissue prices were not enough yet to absorb an increase of approximately 30% in production costs, due above all of course to rising prices for hardwood pulp, which impacted our dealer value of our own plant and also for softwood pulp as well as actually for a number of chemicals. So in this context, our EBITDA totaled €455,000,000 at the level for the group representing an increase of 13% when compared to 2017 EBITDA as you can see on Slide 15. This increase was due essentially to the significant price improvement of pulp and paper prices, which did offset volume. As we have mentioned previously, volumes had a negative impact on EBITDA and also some cost of both negative return. Production costs were again pushed up by a negative trend in chemicals. We estimate the accumulated increase there of around €10,000,000 with an impact on variable unit production costs for pulp, paper and tissue. Fiber costs also increased by approximately €14,000,000 due essentially to the purchase offshore fiber just mentioned for our tissue production in Gilaveras and also the purchases of long fiber. In overhead, personnel costs presented the most significant increase by €9,200,000 due an increase in the estimate for performance bonuses reflecting the group's strong results, expansion of the workforce with the new issue project in the sea and the rejuvenation program underway. So we experienced an increase in these cost items that would have had a greater negative impact if we hadn't also worked on the cost reduction measures as we explained on the next slide. Contributing positively to EBITDA is, of course, the sale of the pellet business, impact of €30,000,000 which was partially offset by the negative impact of the anti dumping duties, which we reduced during the 3rd Q4 accounts. Total, EUR 18,000,000 negative impact. So EBITDA figure for 2018 would have been €460,000,000 if those two impacts, the positive and the negative one, would not have occurred. We also registered a negative impact on biological assets in Mozambique of approximately EUR 6,700,000 which of course also negatively impacted our EBITDA. So as referred to previously and moving to Slide 17, let's look at the results of our M2 program, which we presented to you already several times and that is ongoing since 2016. The program achieved a positive impact this year of approximately €21,000,000 year on year on the EBITDA. Roughly 99 new initiatives were launched in the start of the year to cut costs. With 84 of these achieving a positive impact within 2018. We thought we would share with you some of the most successful initiatives so that you get a flavor for the program. Initiatives on 1 side related to reducing long fiber consumption at the Figuele de Porch Mill as a result of steps taken to control operations and raise employee awareness. Kaizen type of approach, this had an impact of over €2,500,000,000 in 2019. Second example, a new system for managing wood chips tax also as we have at the beginning of the first slide, which generates savings we estimate of €2,000,000 just by cutting specific consumption of wood. Last but not least, several cross group projects designed to optimize logistical routes, namely in shipping and inland transport, are estimated to have contributed to a saving of €2,200,000 in 2018. These are just a few examples of the measures with the highest impact, but our goal is to consistently work on our global efficiency in a way to achieve continuous improvement of cost and operational efficiency. Going to Slide 17. We have now some detail on the evolution of our free cash flow, which stood at an impressive €211,000,000 Specifically, if we consider that our CapEx figure for the year was even larger EUR 260,000,000 So free cash flow was positively impacted by a strong operating cash flow as well as an inflow from the already referred sale of the pellet business. Cash wise, the impact was EUR 68,000,000. So at the end 2018, as you can see on slide 18, the group's net debt stood at €683,000,000 down by €10,000,000 from year end 2017, reflecting both payment of dividends of 200,000,000 and capital expenditure of 240. Net debt to EBITDA stands therefore at EUR 1.7 billion. We see it at a comfortable level and is already reducing from the peak level of 1.7 achieved within the year actually at the end of June. A couple of additional details regarding our debt profile can be found on Slide 19. So at the end of December, our total debt had an average maturity of 2.6 and an average cost of 1.6 percent, with a significant portion of the debt being fixed, actually 68% versus 32% variable. The company is currently working on extending the maturity of its debt and diversify its sources of funding. We are actually pleased to announce in that respect that the group very recently signed the first green commercial paper in Portugal in the amount of €65,000,000 and with a term of 7 years. The financing conditions are linked to the environmental, social and governance classification, that's why it's called CRIM, which is certified by an independent environmental agency. Navigator already has a very good ESG rating. And in case of improvement, it will see its financial conditions further enhanced. This is yet another demonstration of the Navigators Company commitment to social and environmental responsibility. Going to Slide 20. We see our financial results, which showed a loss of EUR 22,500,000, which do not compare positive to a loss of only Kotoko 7,700,000 in 2017. Despite positive trends actually in the cost of group operations and funding, a combination of other factors had a quite negative impact on our financial results. I would like to share 3 of the most important ones. First, we had a drop of €10,000,000 in gains on currency hedges taken out by the company. 2nd, a reduction of €3,300,000 using the results from our investment of surplus liquidity in, of course, the context of generalized slump in financial markets. 3rd, recognition at the end of the Q1 of a negative figure of approximately €1,500,000 resulting from the difference between the nominal and the current value of the amount still receivable for sale of the pellet business. We have referred this already previously, but it's still of course also at the end of the year. Finally, our CapEx is detailed on Slide 20. Navigator recorded annual CapEx of €216,500,000 to be very specific and the 4th quarter figure of €68,000,000 Expansion CapEx of this total represented approximately €129,000,000 and was the most relevant value, of course. We have already mentioned the main expansion projects, The C and Tissue project representing €83,000,000 in this period and the capacity expansion figure that was around €37,000,000 in this period. Finally, the partial conversion already mentioned of our PMP for heavyweight, it represents around €8,000,000 If we look at maintenance and recurring CapEx, this totaled €81,000,000 and included besides the regular maintenance, the capitalization of certain costs relating to production stoppages as well as the damages caused by Hurricane Leslie at the figure of the foresight. So we will briefly make a wrap up of the most relevant projects and I hand over for that to Johanna Appleton. Yes. Going now to Slide 23, we have the expansion of the top capacity in Siguir des Proges. So 2018 saw the completion and the start up of what we call PO3, which is the Optimization Project number 3, of increasing its top production capacity at the Mill where nominal capacity was extended from 580,000 tonnes to 650,000 tonnes per year. This project also entailed the SKU's important environmental improvement, significant overall impact at the Stegazafoss industrial complex. One of the aims was to improve efficiency in the production process, setting specific consumption of wood and chemicals and also implementing best environmental processes. The group actually contracted a loan of EUR 40,000,000 from the European Investment Bank to finance this project. This project's aim of increased efficiency and significant improvement in environmental factors is clearly in line with the institution's declared aim of fighting climate change. The loan contracted is available in 10 years from the issue and was only issued actually in early 2019. So if we go now to the next slide, just a few comments on the conversion of the PN3 machine in Sittelva. The conversion project was completed in the Q4 on Paper Machine 3, a pituitable industrial complex, equipping the machines with a cipher with damages between 135 grams 300 grams per square meter, involving a global investment of €11,800,000 Subverting the paper machine to produce heavyweights entails adding new equipment and modifying existing equipment to ensure that the company will produce paper that can position themselves at the top of the quality range in the heavyweight market. Heavyweight segment is one of the complements current parameters of 60 grams to 120 grams per square meter, in particular in the printing segment, which accounts for around onethree of the folio uncoated wood free business in Europe and approximately for 7% of all uncoated wood free business in Europe. By producing its own heavyweight papers, Navigator will be able to exploit more business opportunities, complementing its existing portfolio with quality heavyweight, permitting the company to develop a sales presence in a market niche with excellent prospects for growth. The aim is to achieve output of approximately 35,000 tonnes per year at cruising speed. I will now ask Nuno Sanches to comment on the Tissue and Mozambique project. Nuno? Thanks, Joanna. Going to Slide 22 on the new Tissue Mill in Casia, I think it's actually Slide 24. As Diego previously referred, the completion of the project for the group's new tissue mill in Cassia represents an important milestone for the group and an attainment of its strategic net out in 20 2015. Position Navigator as the 3rd largest tissue manufacturer in Iberia with total production capacity of 130,000 tons in mother rims and converting capacity of finished products of 100 and 20,000 tons per year. The new mill equipped with large scale sophisticated industrial assets is integrated upstream with pulp production giving it competitive advantage in terms of production costs, use of the high quality solutions for manufacturing in Casillas and an excellent location near the port of Africa, which will allow us to sell new key products to more recent markets. The various production lines started up over the 2nd 3rd quarters with the consumer line starting production in May followed by the paper napkins and industrial tissue lines in July. Materiel's production started in September and is still a therapeutic. So word now on Mozambique. As reported to the market on July 9 last year, Porto Mozambique and the government of Mozambique have signed a memorandum of understanding concerning the company's revised investment plan due to being implemented over 2 phases. In the first phase, if condition precedents are met, Portocell Mozambique will create a forestry base occupying 40,000 hectares supply future units producing Eucalyptus wood chips for export. Total investment is estimated at $140,000,000 or annual exports of around $1,000,000 Porto Salvatovic and the government have set up a joint team to work to ensure that the condition precedents for advancing the investment plan are met. This will involve and is involving establishing the logistical infrastructure needed for exporting wood chips. The first phase of the project is accordingly conditional on satisfactory resolution of the commission precedents identified in the memorandum of understanding signed with the government of Mozambique. These conditions have not yet been met. The view of the actions of negative of colitis with market in Mozambique the fact that conditions are not getting delayed, part of the ship deal, the company reported impairment relating to the fair value of biological assets located in the Adesir Province with value of €6,700,000 Although the MoU signed with the commitment with a view to achieve readiness for the 2 new projects by December 31 last year, This proved not to be possible and both parties continue to work to achieve these aims. In view of the situation, Naviget decided for the sake of prudence to report not just the respective impairments, but also an additional provision of €12,000,000,000 in its accounts at year end 2019 hedged against the current scenario set by law firm. Back to Diop. Thank you, Nuno. Now just a few words on our outlook for 2019. As said earlier, there are no significant new increases in production capacity or market pulp being announced for the next 3 years. And so capacity utilization rates can be expected to increase and to allow hardwood pulp prices stay at or above the US1000 dollars per ton mark in the coming years. After the Chinese New Year, paper and board production is expected to rebound and boost market demand. In Encoated wood free paper, demand in Europe is expected to revive in the early months of 2019, principally in the market of Central, Southern and Eastern Europe, most of them in a way. In the U. S, the potential drop in encoding which we demand will be more than offset by the already referred to closure of capacity of more than 550,000 tons by Georgia Pacific in March this year. This will certainly end to push prices upwards. Already in early February, in line with other U. S. Paper manufacturers, Navigator announced to its customers a price increase in the U. S. Market of US66 dollars per ton effective as from 1st March onwards. In the tissue market, producers remain under strong pressure from rising pulp prices and from the cost of chemicals and energy. Navigator successfully implemented the price increase for its products announced in November last year. At the same time, starting up its new tissue milling procedure helped us producing reels as of September. Commercial efforts made over the course of 2018 rolled out the prospect of the new output being successfully placed with customers and the company is committed to expanding its market share at above the average rate of market growth. This overall positive context for 2019 may, however, be affected by increases in certain costs, especially energy. And there are also continued concerns about the evolution of excess rates, both U. S. Dollar to euro and British pound to euro rate. The company continues to develop its business model, acting in a proactive way in the improvement of its performance and working in a innovative and sustainable manner. It was with great satisfaction that in January 2019, Navigator was distinguished by the Carbon Disclosure Product, CDP, as a global leader in corporate climate action, achieving a top place in the organization's climate change agencies. The company was singled out for its actions in 2018 in reducing emissions, cutting climate risk and developing a low carbon impact economy. It was actually the only Portuguese company to achieve the top rating. This constituted public recognition of an important achievement by Navigator, which has announced its next aim to be carbon neutral company by 2,035. This is 10 years above and before the government objective for the country as a whole. Just to finish, I will ask Jean Paul to say a few words on some of our projects regarding bioeconomy. Jean Paul, please. Thank you, such as pulp and coconut food freebaiters and fishy. One important pillar of business diversification true biorefineries where good forest residues and processed by products are comprehensively converted into fiber products, bioproducts, biofuels and new biomaterials. Bioeconomy projects involve hedges, input at the R and D, up scaling and pre feasibility levels and the new corporate bioeconomy and partnerships division of Navigator kept the business development and industrialization stable. Several projects are on the pipeline to reach industrialization and market. Essential oils from the U. K. Gulf Coast, Forest, Religions will be produced soon in a new industrial facility located at the Casino. This will represent the 1st Navigator flagship on forest based bioeconomy, 2nd generation methanol production from forest residue is at a dense stage of industrial feasibility analysis, a final decision being scheduled to the end of 2019. The potential industrial production of fiber based thermoplastic, biocomposites is under technological and economic assessment. Other projects at an earlier stage of potential industrial development include the production of nanobacterial cell walls and fertilizers from crushed or new residues. Part of this project originated from R and D development at Reish Institute, where the navigator company invested significantly in the last few years. Revenues budget increased from €3,000,000 to €4,000,000 in 20.15 to €6,000,000 to 7 €1,000,000 in 2019. The major ongoing projects, Efraige impact project called Focused on Bioeconomy, involves a consortium with National and international universities and R and D centers and a budget of approximately €15,000,000 for the next 4 years. Thank you. Thank you, Jean Paul. This concludes our comments on results. We are now ready for the Q and A, first on results, and then Gil will also be available to answer questions at the end of his mandate. Jonker Stavrank, the Chairman of the Board is also here with us, and he will make a brief statement at the end. Thank you. Ladies and gentlemen, the Q and A session starts now. Thank you. The first question comes from Bruno Beza from Caixabank BPI. Please go ahead. Yes, good morning. Thank you for taking my questions. The first one on prices evolution. And you said in the release that you are expecting pulp prices to recover to mid-twenty 18 levels, which would mean significant recovery from the levels we are seeing as of today. My first question will be related with the reasons why you see this price recovery, particularly considering that prices continue to decline and also the fact that European and Chinese ports seem to be full of stocks at this stage. If you could provide a little bit more visibility on the reasons for your expectation will be good. And the second one also related with prices, but here in the paper front, I think you've put in the presentation that you expect stable paper prices in 2019. The fact is that paper prices are already around 5% above the average price that we saw in 20 18. So are you expecting any kind of slowdown in terms of the paper price evolution going forward? What are the reasons why you are expecting this? And also related with this because it seems a little bit contradictory. If you are expecting pulp prices to recover after this weaker seasonal demand period in China, Wouldn't we expect new price hikes in terms of paper after in the spring period? So this will be my second question on prices. The third one on the mix effect. You've mentioned this improving mix weakness throughout 2018. And my question is, what are your expectations regarding the mix evolution during 2019? Thank you very much. Very good. Thank you very much for your question. Actually, the second and the third, you will see that they are the same questions. So first question on pulp. Actually, the pulp prices have decreased in the mainly November, December slight decreases. But in January, prices are already again going back up. So the reason why we believe that this will occur during the year is that actually it did already stopped. So if we would be talking say a month ago, it will be tougher for us to support this view, but currently prices in China and in other areas of the work for pulp did already start to recover. 2nd aspect, we still believe that medium to long term what runs prices is supply and demand, net of logistics impacts, destocking, some traders' pressures, some tactical moves that can happen and that we don't see any additional concerned about China, they are mostly concerned about exports from China. The key driver for the pulp in China is tissue and tissue is mostly internal consumption in China. So we don't see actually any reason why it would not restart after the Chinese New Year. So in pulp, it's clear. We've already started recovering and based on domestic consumption, so we are positive. Paper. So first question on paper. Why do we see this stable even though it started to increase? Because we see it stable for our own price. And why? This links to your other question, because our mix of sales will be slightly less rich. We plan to sell a lot more paper in 2019, but the increase in paper quantity sold will not be premium paper because as you know, we already have 50% market share of premium. So the additional quantity of paper sold will be at a lower price. Therefore, the mix impact here will be playing against us. It's a poor reach of a much larger quantity, but therefore, the price will be not increasing. It will be stable. I think this answers your last question, why we see the paper how we see the paper mix evolving. As I said, key priority for our sales team in paper in 2019 production allowing will be to sell a lot more, but we'll be selling a lot more standard and some economical premium. We are close to what we can sell from the market perspective. I hope this answers your questions. Yes, very clear. Thank you very much. Thank you. The next question comes from Nuno Stacio from Haitong Bank. Please go ahead. Hi, good morning, everyone. A couple of questions, if I may. The first one on in terms of volumes, after this year was a little bit weaker, should we expect production levels to come back to 2017 figures or could they even be above, especially in terms of Piper? And in the pulp, considering this expansion of capacity, could you also give us some indications of what you 2nd theme is regarding the CapEx. Recurring CapEx level was quite high this year. Is this I think that your message has been that next year you also have some investments related to environmental schemes. So could you confirm us that in 2019, the recurring and maintenance CapEx will also be relatively high? And my question would be also in 2020, do you expect this level of maintenance CapEx to moderate? And if you could tell us how much do you although obviously it's not budget yet, but what would be an acceptable or normalized level? And the final question is, I've seen this your last comments in terms of the bioeconomy investments, How much could this mean in terms of CapEx in terms of cash flow? Thank you. Very good, Nuno. Thank you for your three questions. I'll take the first 2 and Juan Pablo will take the last one. So volumes for 2019, paper, pulp and tissue, it's very simple. We anticipate to produce a lot more than 2018 and also than 2017. So as you know, if I start backwards in tissue, we now have a new machine. So we have got to produce a lot more. In pulp, we have had also a large expansion. And when you have an expansion, it has 2 impacts. The first impact is that you then benefit from the expansion, but also the next year you don't have the stoppage that you have to do for the expansion. So the increase in production is quite significant at constant stock levels. Finally, in paper, we will have our usual creep. And if we don't have any hurricane or any large issue, and we have some this year, namely also the stoppage for the PM3, which also did still some production. So we anticipate to have more production of paper. So huge difference in tissue, some difference in pulp, smaller but still some difference in paper. So that's for the volumes. CapEx. So as you know, we do not give guidance except on CapEx, and it's true that we anticipate 2019 to be strong on the regulatory front. This could mean that we could anticipate CapEx anywhere between $120,000,000 $150,000,000 let's say, depending on how things go. So for the first question on the bio, CapEx could be associated mainly to the 2 key projects that Jean Paulo mentioned. I will hand over to him. Jean Paulo? So we have planned for the first project to buy essential oils CapEx of approximately €10,000,000 For the second project, we are still under evaluation, and we will not be able to disclose any figures at the moment. I hope that helps answer your 3 questions. Yes. But just coming back to CapEx, when you mentioned your €120,000,000 to €150,000,000 this is only maintenance CapEx, it does not include any project expansion or anything like that? Correct. This is what we plan currently. Okay. So we have no specific plans as you know currently for 2019. Okay. But this is a huge amount comparing to what you have been doing. Can you detail us a little bit more what you will have to do? The key topic here is the regulatory front. So as soon as we have the numbers more fine tuned, we will share them with you. But we're talking about a very large investment that will be needed here in Satovel, which will be several tens of €1,000,000 that's why the number is so large. I also gave you a bracket. So I know well that it's large. It's the traditional recurrent and maintenance CapEx. And then we have 2, one very large issue in Sotubo and another one in Figueres de Porz with the biomass boiler. So that's why it will add up to a number anywhere between 120 and 160. But to your question, does this mean expansion? No. Okay. Thank you. Thank you. The next question comes from Benoit de Catillon from Degroof Petercam. Please go ahead. Hi. I have two questions. The first one is, can you give us more color on the reasons of the non renewal of your mandate? And the second one is, what can when can we expect more clarity on dividend policy going forward? Thank you. Hello, Benoit, thank you for your question. Diogo will answer the question regarding the mandate at the end, and he will now make a few comments with an issue, okay? Okay? Okay. So on the dividend, very good. So as you know, we have had over the last years a very consistent dividend policy and the indications we have at the board level is that there is no anticipated change actually in the dividend policy. So I think the best guess for tomorrow is yesterday's numbers. So I would not anticipate any change in the dividend policy. Okay. Thanks. Thank you. Ladies and gentlemen, there are no further questions. I now give back the word to the company. Thank you. Okay. So then very briefly taking then your question on the non renewal. So I have to say that I embraced the challenge in 5 years ago defined by our Pierre Giroche Perez And the challenge I was offered was to diversify and renew something I believe with the team I did with commitments and enthusiasm and together with everyone here in the company. So as you know, we've diversified, namely with tissue, we've acquired a company, increased fourfold the capacity of that operation of that unit. We have rejuvenated a lot the group. On average, the age of the people that navigated today is almost 4 years below what it was 5 years ago. And we have a rejuvenating program for people who want to retire a little bit earlier. We were able thanks to the investment that our shareholders allowed, we were able to recruit almost 1,000 people more over 5 years. So I believe we have achieved basically the goals that we were supposed to achieve and all that in as you know in a reasonable evolution of the profitability, which we were elected to be in a positive factor context. So EBITDA, as you know, has grown every single year from 3 to 8 to 4 55 this year. At the same time, we were able to invest a total of €730,000,000 So on the other hand, over this period, we launched a new corporate brand, as you know, and worked on management methods with a significant effort to renew the image of the company. Today, Navigator sits on the Board of WBCSD. We have just referred A rating for climate action issued the 1st green commercial paper. So I think the company is in a fantastic shape, strong, prepared to face risks as well as opportunities. So I thought this was a cycle, a cycle for me and that the time has come to close this chapter, let's say, of my professional life. So this is a personal and quiet decision. So we will now be focusing together with Joao, our Chairman, who will also become CEO after the General Assembly. We will work together with the Executive Committee to bring Navigator to a further step. I mean, I really this is the view. I came in the company was fantastic. I leave the company even better. I am sure those that will come after me will make it even better. There are no questions on the conference call. I give the floor back to Joanna. Thank you. Thank you. I will now ask Marco Torbrand, Chairman of the company, to make a brief statement. Thank you, Joao and Joanna. Good morning to everybody. I just wanted to make a small statement to check with it appropriate this occasion. First of all, I would like to convey the appreciation of the Board and my personal thank you to Diogo for his leadership of the company over the last 5 years. As it has just said, much has been achieved during this period. The business of the company has been set and the number of transformational elements in its talent management, internal processes and corporate image have been introduced. The company has also significantly strengthened its track record as a leading sustainable company. This has been achieved in the context of very solid results, which are a tribute to the improvement efforts underway and the company's ability to successfully navigate the favorable pulp pricing environment. At this point now, our main focus is to ensure we keep the strong momentum and the seamless transition. Diorgo will continue until the 9th April when the current mandate finishes. The plan is that I will take over from him on that date. Except for Diogo, it is our intention that executive team will remain unchanged. Our common focus will be to continue the good work that has been done so far, in Pluvink. A relentless focus on delivering the budgeted results in our core uncoated wood free and pulp business. Continued industrial and commercial excellence as well as a focus on efficiency will be key. Fully getting up to speed on our new tissue machine and further strengthening a winning tissue business model. Maintaining the momentum on the transformational efforts underway and on our sustainability agenda. The Board will also be working on finding the best leadership solution for the company moving forward. This will take the time needed and will be announced when completed. Until then, our relentless focus of Dior, myself and the executive team will be on the above agenda. We are absolutely confident on the ability of the company to deliver on it. Thank you. Thank you, Joao. This ends our call for today.